Solar interview: Bosch PV activities to be discontinued

In an interview published in a Bosch associate newspaper executives give reasons for the termination of the company’s solar PV business.

Solar Server publishes the original interview with Franz Fehrenbach, Chairman of the Supervisory Board of Robert Bosch GmbH, and Dr. Volkmar Denner, Chairman, Board of Management Robert Bosch GmbHwith kind permission by Bosch.

Mr. Denner, you announced on March 22 that Bosch will be discontinuing its solar energy activities. Why is that?

Denner: Last year, we sustained a loss of one billion euros. Changing market conditions mean that we couldn't see any chance of a lasting improvement. We couldn't offset such enormous and unrelenting price pressure in a market that is becoming ever more difficult. Even though we reduced our manufacturing costs significantly in 2012, it wasn't enough to compensate for the fall in prices of up to 40 percent. Nearly the entire solar industry is currently deep in the red worldwide.

What were the reasons for your decision?

Denner: Last year, Bosch comprehensively examined every aspect of its solar business. We considered the latest technological advances, additional ways of reducing costs, as well as possible partnerships. However, none of these possibilities offered a solution that would be economically viable over the long term.

Was the decision to enter photovoltaics wrong?

Denner: No. At the time, we thoroughly examined every aspect of the decision and prepared ourselves systematically. The drastic changes in the market, particularly the rapid increase in capacity in China, simply couldn't be foreseen. We are still convinced that photovoltaics will play an important role in the energy mix of the future. However, even we are not capable of sustaining such heavy losses forever.

Mr. Fehrenbach, do you regard the exit as a personal defeat or failure?

Fehrenbach: The decision was very difficult for us. First, because we've recorded heavy losses. Then there are the prospects for photovoltaics, and the important role solar energy will play in the future. But when all is said and done, we simply cannot accept such heavy, long-term losses in all good conscience. And last but not least there is the responsibility for our many associates and their families. Our workforce has shown incredible commitment and made significant progress in reducing manufacturing costs. However, prices fell incredibly fast, and our technological innovations simply couldn't keep pace. We all have to concede that the progress we made wasn't enough to allow us to operate in the market in a competitive and economically viable manner over the long term. Yes, that hurts. But running a company is always about dealing with failure as well as success. And when market conditions change as fundamentally as they have in this industry, we must face the consequences. Looked at dispassionately, the decision we've made seems reasonable and understandable. But to be honest with you, it's perhaps the most painful decision I've ever had to make in my career.

The decision is going to cost approximately 3,000 associates their jobs. Is that compatible with Bosch's sense of responsibility?

Denner: Making this decision was not easy for us, also because of this consideration. For this reason, we weighed and assessed every possible option, right up to the last minute. Nevertheless, our responsibility is not limited to individual locations, but rather extends to every single job within the Bosch Group, worldwide. When market conditions change so completely in a business area that it becomes unlikely that it will be able to achieve lasting economic success, it's also a matter of entrepreneurial responsibility to withdraw from that area and stanch massive, long-term losses in order to safeguard the entire company. However, this responsibility also means that we will not leave our associates in the Solar Energy division in the lurch at this difficult time, but will instead try to support them in their search for new jobs at other Bosch locations and at other companies. It is with this in mind that we're working closely with executive management and employee representatives.

Mr. Fehrenbach, can you accept this decision? After all, it was you that encouraged the gradual but large-scale entry into photovoltaics starting in 2008.

Fehrenbach: Yes, I absolutely support this decision. I have always said that there cannot be cross-financing of the Solar Energy division forever. We have very different conditions today than we did in 2008. The market has had to sustain a dramatic fall in prices of up to 40 percent per year. Others have already had to exit the market. You simply have to accept the facts. This is also true for a supplier of technology and services such as Bosch, even if this decision was not easy for us to make and we continued our intensive search for alternative solutions until the end. As the chairman of the supervisory board, I accept this and support this decision fully.

Does this mean the end of your strategy of diversification and “green business”?

Denner: No, the Bosch Group generates more than 40 percent of its sales with energy-efficient and resource-conserving products. We spend half our R&D budget, or some 2.4 billion euros, on developing new eco-friendly products. We will keep to this strategy, despite our exit from the solar business.

Fehrenbach: Helping to protect the environment will remain an important element of our strategy. We remain convinced that renewable energy – including photovoltaics – will play an important role in the energy mix of the future. Nevertheless, given the situation we're in and the changed market environment, we are no longer competitive in this area.

What will the exit mean for the new Energy and Building Technology business sector?

Denner: Our Thermotechnology and Security Systems divisions account for the lion's share of our Energy and Building Technology business sector. And with Bosch currently focusing on the subject of “interconnectivity” across all business sectors, there is a lot of potential for developing cross-divisional products, even without the Solar Energy division. Only a handful of companies anywhere in the world have such a wealth of complementary expertise.

How much will your four years in the solar market have cost you by the time you exit completely?

Denner: At present, the total loss amounts to 2.4 billion euros, including 1.6 billion euros in impairments. To that, we will have to add the cost of the exit itself. Since this process involves a number of risks, and since the details of its implementation still need to be negotiated with the employee representatives, we cannot give a precise figure at this time.

And how long will the exit in fact take? That is, until everything is closed or sold and negotiations with the unions are complete?

Denner: This will take a while. On one hand, the negotiations with employee representatives will take time, and on the other, the sale of individual manufacturing units won't happen overnight. If we don't manage to sell, we will have to stop production at the beginning of 2014. As of the same date, all development, sales, and administrative activities would be ended.